Intrinsic value of Denbury Resources Inc. - DNR

Previous Close

$1.32

  Intrinsic Value

$3.63

stock screener

  Rating & Target

str. buy

+175%

Previous close

$1.32

 
Intrinsic value

$3.63

 
Up/down potential

+175%

 
Rating

str. buy

We calculate the intrinsic value of DNR stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 0.6

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  3.60
  3.74
  3.87
  3.98
  4.08
  4.17
  4.26
  4.33
  4.40
  4.46
  4.51
  4.56
  4.60
  4.64
  4.68
  4.71
  4.74
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.93
Revenue, $m
  1,527
  1,584
  1,645
  1,711
  1,781
  1,855
  1,934
  2,018
  2,106
  2,200
  2,300
  2,405
  2,515
  2,632
  2,755
  2,885
  3,022
  3,166
  3,317
  3,477
  3,645
  3,822
  4,008
  4,203
  4,408
  4,624
  4,851
  5,090
  5,341
  5,604
Variable operating expenses, $m
  481
  499
  518
  539
  561
  584
  609
  636
  664
  693
  724
  757
  792
  829
  868
  909
  952
  997
  1,045
  1,095
  1,148
  1,204
  1,262
  1,324
  1,389
  1,457
  1,528
  1,603
  1,682
  1,765
Fixed operating expenses, $m
  573
  586
  599
  612
  625
  639
  653
  668
  682
  697
  713
  728
  744
  761
  778
  795
  812
  830
  848
  867
  886
  905
  925
  946
  967
  988
  1,010
  1,032
  1,054
  1,078
Total operating expenses, $m
  1,054
  1,085
  1,117
  1,151
  1,186
  1,223
  1,262
  1,304
  1,346
  1,390
  1,437
  1,485
  1,536
  1,590
  1,646
  1,704
  1,764
  1,827
  1,893
  1,962
  2,034
  2,109
  2,187
  2,270
  2,356
  2,445
  2,538
  2,635
  2,736
  2,843
Operating income, $m
  473
  499
  528
  560
  594
  631
  671
  714
  761
  810
  863
  919
  979
  1,042
  1,110
  1,182
  1,258
  1,339
  1,424
  1,515
  1,611
  1,712
  1,820
  1,933
  2,053
  2,180
  2,314
  2,455
  2,604
  2,761
EBITDA, $m
  697
  732
  770
  811
  856
  904
  955
  1,011
  1,070
  1,133
  1,200
  1,272
  1,348
  1,429
  1,514
  1,605
  1,702
  1,803
  1,911
  2,025
  2,146
  2,274
  2,408
  2,550
  2,700
  2,859
  3,026
  3,202
  3,388
  3,584
Interest expense (income), $m
  131
  150
  156
  164
  172
  181
  190
  200
  210
  221
  232
  245
  258
  272
  286
  301
  318
  335
  353
  371
  391
  412
  434
  458
  482
  508
  534
  563
  593
  624
  657
Earnings before tax, $m
  323
  343
  364
  388
  414
  442
  472
  505
  540
  577
  618
  661
  707
  756
  808
  864
  923
  986
  1,053
  1,124
  1,199
  1,278
  1,362
  1,451
  1,546
  1,645
  1,751
  1,862
  1,980
  2,104
Tax expense, $m
  87
  93
  98
  105
  112
  119
  127
  136
  146
  156
  167
  178
  191
  204
  218
  233
  249
  266
  284
  303
  324
  345
  368
  392
  417
  444
  473
  503
  535
  568
Net income, $m
  236
  250
  266
  283
  302
  322
  345
  368
  394
  421
  451
  482
  516
  552
  590
  631
  674
  720
  768
  820
  875
  933
  994
  1,059
  1,128
  1,201
  1,278
  1,359
  1,445
  1,536

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  4,894
  5,077
  5,274
  5,484
  5,707
  5,946
  6,199
  6,467
  6,752
  7,052
  7,371
  7,707
  8,062
  8,436
  8,831
  9,247
  9,685
  10,147
  10,633
  11,145
  11,683
  12,249
  12,845
  13,471
  14,129
  14,822
  15,549
  16,314
  17,118
  17,962
Adjusted assets (=assets-cash), $m
  4,894
  5,077
  5,274
  5,484
  5,707
  5,946
  6,199
  6,467
  6,752
  7,052
  7,371
  7,707
  8,062
  8,436
  8,831
  9,247
  9,685
  10,147
  10,633
  11,145
  11,683
  12,249
  12,845
  13,471
  14,129
  14,822
  15,549
  16,314
  17,118
  17,962
Revenue / Adjusted assets
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
  0.312
Average production assets, $m
  4,395
  4,559
  4,736
  4,924
  5,125
  5,339
  5,566
  5,807
  6,062
  6,333
  6,618
  6,920
  7,239
  7,575
  7,930
  8,303
  8,697
  9,111
  9,548
  10,007
  10,490
  10,999
  11,534
  12,096
  12,687
  13,309
  13,962
  14,649
  15,371
  16,129
Working capital, $m
  -98
  -101
  -105
  -109
  -114
  -119
  -124
  -129
  -135
  -141
  -147
  -154
  -161
  -168
  -176
  -185
  -193
  -203
  -212
  -223
  -233
  -245
  -256
  -269
  -282
  -296
  -310
  -326
  -342
  -359
Total debt, $m
  2,898
  3,037
  3,185
  3,344
  3,514
  3,695
  3,887
  4,090
  4,306
  4,534
  4,775
  5,030
  5,299
  5,582
  5,882
  6,197
  6,529
  6,879
  7,248
  7,635
  8,043
  8,473
  8,924
  9,399
  9,898
  10,423
  10,974
  11,554
  12,163
  12,803
Total liabilities, $m
  3,710
  3,849
  3,998
  4,157
  4,326
  4,507
  4,699
  4,902
  5,118
  5,346
  5,587
  5,842
  6,111
  6,395
  6,694
  7,009
  7,341
  7,691
  8,060
  8,448
  8,856
  9,285
  9,736
  10,211
  10,710
  11,235
  11,786
  12,366
  12,975
  13,616
Total equity, $m
  1,184
  1,229
  1,276
  1,327
  1,381
  1,439
  1,500
  1,565
  1,634
  1,707
  1,784
  1,865
  1,951
  2,042
  2,137
  2,238
  2,344
  2,456
  2,573
  2,697
  2,827
  2,964
  3,108
  3,260
  3,419
  3,587
  3,763
  3,948
  4,143
  4,347
Total liabilities and equity, $m
  4,894
  5,078
  5,274
  5,484
  5,707
  5,946
  6,199
  6,467
  6,752
  7,053
  7,371
  7,707
  8,062
  8,437
  8,831
  9,247
  9,685
  10,147
  10,633
  11,145
  11,683
  12,249
  12,844
  13,471
  14,129
  14,822
  15,549
  16,314
  17,118
  17,963
Debt-to-equity ratio
  2.450
  2.470
  2.500
  2.520
  2.540
  2.570
  2.590
  2.610
  2.640
  2.660
  2.680
  2.700
  2.720
  2.730
  2.750
  2.770
  2.790
  2.800
  2.820
  2.830
  2.840
  2.860
  2.870
  2.880
  2.890
  2.910
  2.920
  2.930
  2.940
  2.950
Adjusted equity ratio
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242
  0.242

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  236
  250
  266
  283
  302
  322
  345
  368
  394
  421
  451
  482
  516
  552
  590
  631
  674
  720
  768
  820
  875
  933
  994
  1,059
  1,128
  1,201
  1,278
  1,359
  1,445
  1,536
Depreciation, amort., depletion, $m
  224
  233
  242
  251
  261
  272
  284
  296
  309
  323
  338
  353
  369
  386
  405
  424
  444
  465
  487
  511
  535
  561
  588
  617
  647
  679
  712
  747
  784
  823
Funds from operations, $m
  460
  483
  508
  534
  563
  595
  629
  665
  703
  745
  789
  835
  885
  938
  995
  1,054
  1,118
  1,185
  1,256
  1,331
  1,410
  1,494
  1,583
  1,677
  1,776
  1,880
  1,990
  2,107
  2,230
  2,359
Change in working capital, $m
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -13
  -14
  -15
  -15
  -16
  -17
Cash from operations, $m
  464
  486
  511
  539
  568
  600
  634
  670
  709
  751
  795
  842
  892
  946
  1,003
  1,063
  1,126
  1,194
  1,265
  1,341
  1,421
  1,505
  1,595
  1,689
  1,789
  1,894
  2,005
  2,122
  2,246
  2,376
Maintenance CAPEX, $m
  -216
  -224
  -233
  -242
  -251
  -261
  -272
  -284
  -296
  -309
  -323
  -338
  -353
  -369
  -386
  -405
  -424
  -444
  -465
  -487
  -511
  -535
  -561
  -588
  -617
  -647
  -679
  -712
  -747
  -784
New CAPEX, $m
  -152
  -164
  -176
  -188
  -201
  -214
  -227
  -241
  -255
  -270
  -286
  -302
  -319
  -336
  -354
  -374
  -394
  -415
  -436
  -459
  -483
  -508
  -535
  -562
  -591
  -622
  -653
  -687
  -722
  -758
Cash from investing activities, $m
  -368
  -388
  -409
  -430
  -452
  -475
  -499
  -525
  -551
  -579
  -609
  -640
  -672
  -705
  -740
  -779
  -818
  -859
  -901
  -946
  -994
  -1,043
  -1,096
  -1,150
  -1,208
  -1,269
  -1,332
  -1,399
  -1,469
  -1,542
Free cash flow, $m
  95
  98
  103
  109
  116
  124
  134
  145
  157
  171
  186
  203
  221
  240
  262
  284
  309
  336
  364
  394
  427
  462
  499
  538
  580
  625
  673
  723
  777
  833
Issuance/(repayment) of debt, $m
  129
  139
  149
  159
  170
  181
  192
  203
  216
  228
  241
  255
  269
  284
  299
  315
  332
  350
  368
  388
  408
  429
  451
  475
  499
  525
  552
  580
  609
  640
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  129
  139
  149
  159
  170
  181
  192
  203
  216
  228
  241
  255
  269
  284
  299
  315
  332
  350
  368
  388
  408
  429
  451
  475
  499
  525
  552
  580
  609
  640
Total cash flow (excl. dividends), $m
  223
  237
  251
  268
  285
  305
  326
  348
  373
  399
  427
  457
  490
  524
  561
  600
  641
  686
  732
  782
  835
  891
  950
  1,013
  1,079
  1,150
  1,224
  1,303
  1,386
  1,474
Retained Cash Flow (-), $m
  -43
  -44
  -48
  -51
  -54
  -58
  -61
  -65
  -69
  -73
  -77
  -81
  -86
  -91
  -96
  -101
  -106
  -112
  -118
  -124
  -130
  -137
  -144
  -152
  -159
  -168
  -176
  -185
  -195
  -204
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  181
  192
  204
  217
  231
  247
  265
  283
  304
  326
  350
  376
  404
  434
  465
  499
  535
  574
  615
  658
  705
  754
  806
  861
  920
  982
  1,048
  1,118
  1,191
  1,269
Discount rate, %
  9.30
  9.77
  10.25
  10.77
  11.30
  11.87
  12.46
  13.09
  13.74
  14.43
  15.15
  15.91
  16.70
  17.54
  18.41
  19.33
  20.30
  21.32
  22.38
  23.50
  24.68
  25.91
  27.20
  28.57
  29.99
  31.49
  33.07
  34.72
  36.46
  38.28
PV of cash for distribution, $m
  165
  160
  152
  144
  135
  126
  116
  106
  95
  85
  74
  64
  54
  45
  37
  30
  23
  18
  13
  10
  7
  5
  3
  2
  1
  1
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Denbury Resources Inc. is an independent oil and natural gas company. The Company's operations are focused in two operating areas: the Gulf Coast and Rocky Mountain regions. Its properties with proved and producing reserves in the Gulf Coast region are situated in Mississippi, Texas, Louisiana and Alabama, and in the Rocky Mountain region are situated in Montana, North Dakota and Wyoming. It had an estimated proved oil and natural gas reserves of 254.5 million barrels of oil equivalent (MMBOE) as of December 31, 2016. Its primary Gulf Coast carbon dioxide (CO2) source is Jackson Dome, which is located near Jackson, Mississippi. Its mature group of properties includes the initial CO2 field, Little Creek, and other fields, including Brookhaven, Cranfield, Eucutta, Lockhart Crossing, Mallalieu and Soso fields. Its LaBarge Field is located in southwestern Wyoming. Its Riley Ridge Federal Unit is located in southwestern Wyoming and produces gas from the same LaBarge Field.

FINANCIAL RATIOS  of  Denbury Resources Inc. (DNR)

Valuation Ratios
P/E Ratio -0.5
Price to Sales 0.5
Price to Book 1.1
Price to Tangible Book
Price to Cash Flow 2.4
Price to Free Cash Flow -15.5
Growth Rates
Sales Growth Rate -22.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -55%
Cap. Spend. - 3 Yr. Gr. Rate -27.4%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity 621.8%
Total Debt to Equity 639.5%
Interest Coverage -11
Management Effectiveness
Return On Assets -17.6%
Ret/ On Assets - 3 Yr. Avg. -19.2%
Return On Total Capital -24.4%
Ret/ On T. Cap. - 3 Yr. Avg. -26.8%
Return On Equity -113.7%
Return On Equity - 3 Yr. Avg. -76.1%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 104.6%
Gross Margin - 3 Yr. Avg. 103.6%
EBITDA Margin -55.6%
EBITDA Margin - 3 Yr. Avg. -143.5%
Operating Margin -129.8%
Oper. Margin - 3 Yr. Avg. -201.7%
Pre-Tax Margin -155.7%
Pre-Tax Margin - 3 Yr. Avg. -205.5%
Net Profit Margin -100%
Net Profit Margin - 3 Yr. Avg. -140.8%
Effective Tax Rate 35.8%
Eff/ Tax Rate - 3 Yr. Avg. 34.8%
Payout Ratio 0%

DNR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the DNR stock intrinsic value calculation we used $1474 million for the last fiscal year's total revenue generated by Denbury Resources Inc.. The default revenue input number comes from 0001 income statement of Denbury Resources Inc.. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our DNR stock valuation model: a) initial revenue growth rate of 3.6% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 9.3%, whose default value for DNR is calculated based on our internal credit rating of Denbury Resources Inc., is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Denbury Resources Inc..
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of DNR stock the variable cost ratio is equal to 31.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $561 million in the base year in the intrinsic value calculation for DNR stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.4% for Denbury Resources Inc..

Corporate tax rate of 27% is the nominal tax rate for Denbury Resources Inc.. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the DNR stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for DNR are equal to 287.8%.

Life of production assets of 19.6 years is the average useful life of capital assets used in Denbury Resources Inc. operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for DNR is equal to -6.4%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $1141.777 million for Denbury Resources Inc. - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 460.444 million for Denbury Resources Inc. is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Denbury Resources Inc. at the current share price and the inputted number of shares is $0.6 billion.

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